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We're officially halfway through 2024, and it's shaping up to be another great year for stock investors.

The S&P 500 produced a total return of 15.3% through the end of June. That's more than double its historical average for the first half of the year. Its continuous push to new all-time highs bodes well for the second half of the year, too.

If you look under the hood, the vast majority of the S&P 500's returns have been driven by just five stocks through the first half of 2024. The list isn't too dissimilar from the group of stocks that accounted for the bulk of 2023's return either. If you know about the "Magnificent Seven," you'll be familiar with these names. Can these five continue their dominance through the rest of the year?

The five stocks accounting for 63% of the S&P 500's returns in 2024

The S&P 500's aggregate market capitalization increased $5.8 trillion through the first half of 2024.

The following five stocks generated the biggest market cap increases during the first six months of the year, totaling about 63% of the S&P 500s increase in value for 2024.

All of those companies were already among the largest components of the S&P 500 to start the year. Nvidia's continued dominance of the AI chip market has fueled a massive increase in its stock value. Meanwhile, Microsoft, Alphabet, Amazon, and Meta are four of the biggest companies investing in developing cutting-edge artificial intelligence. Microsoft, Alphabet, and Amazon also provide the cloud platforms required for training and running AI-powered applications.

The current trend toward generative AI favors the biggest companies. Building large data centers capable of training large language models and running inferences all day requires a ton of capital. Meta leading the group with its plan to spend between $35 billion and $40 billion in capital expenditures this year. That's an investment smaller companies can't even start to compete with, especially in today's interest rate environment where debt isn't nearly as cheap as it used to be.

As a result, the S&P 500 has become increasingly concentrated among just a few companies. Microsoft, Nvidia, and Apple account for 20% of the index's value. The next seven components add another 16%. We haven't had this level of concentration among the top-10 companies in the S&P 500 since the 1970s.

While there are good reasons for the current level of concentration, investors need to ask if these giant companies can continue to lead the market higher.

Who will lead the next leg up in the market?

Rising concentration in the stock market isn't inherently a concern. As mentioned, there are good reasons the biggest companies have gotten bigger. But, investors should remain mindful of valuations and where the market presents good value.

Nvidia, for example, trades for a forward PE of around 47. That makes it a risky bet on its continued dominance of the AI chip market. It faces challenges from other chipmakers, and its biggest customers are designing their own chips to reduce their reliance on Nvidia. Analysts currently expect strong bottom-line growth for Nvidia, but its high valuation makes any shortfall extremely damaging to the share price.

Not every member of the above group is expensive. Meta Platforms and Alphabet trade for forward PEs around 25x. While those valuations are higher than the S&P 500's overall earnings multiple, it's not an outlandish multiple relative to their earnings growth prospects.

Looking beyond the biggest companies may present many more opportunities for investors. The S&P 500 equal-weight index historically outperforms the cap-weighted index over the long run. Smaller companies typically grow faster than the giants at the top of the market. A $1 billion increase in the market cap of a $10 billion company is a 10% increase. The same amount of inflows into a $1 trillion company is a 0.1% increase.

To make a larger bet on the other 495 companies in the S&P 500, investors could buy the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP). Investors could diversify beyond the S&P 500 using a small-cap ETF, too, such as the iShares Russell 2000 ETF (NYSEMKT: IWM).

While the first half saw the continued dominance of a small number of large-cap growth stocks, the next leg up in the market could come from a large number of smaller companies.

Should you invest $1,000 in Nvidia right now?

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy has positions in Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.